Rajiv Gandhi Equity Savings Scheme or RGESS
Visit : www.nsergess.com
 
Q1. What is RGESS?
Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme introduced by the Ministry of Finance for first time investors in India.
The scheme enables the investor to earn the returns of equity market and be eligible for tax benefits on the investments made under this Scheme.
 
Q2. Who is eligible to participate?
The tax deduction under the Scheme shall be available to a new retail investor who:
  • is a resident of India
  • has not traded in equity market or derivatives market
  • has Gross Total Income for the Financial Year less than or equal to Rs. 10 Lakh
  • complies with the all the other conditions of the Scheme
 
Q3. What are eligible securities?
Investors can only be made in:
  • Companies belonging to BSE-100 or CNX-100 and their Follow On Public Offers
  • PSUs designated as Maharatna, Navratna or Miniratna and their Follow On Public Offers
  • Mutual Fund or Exchange Traded Fund Schemes investing in RGESS eligible securities and their New Fund Offers
  • Initial Public Offers of PSU with 51% or more government holding
 
Q4. What are the benefits of investing in RGESS?
The following are the benefits of RGESS:
  • Investors can get the returns of Equity of top 100 BSE companies.
  • Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments
  • To be eligible for tax deductions, the investments can be made in installments over the financial year for which the tax claims are filed and tax exemption sought
  • Dividend payments are tax free
 
Q5. What is dematerialization (Demat)?
"Dematerialization" is a process by which physical certificates are converted into electronic form.
 
Q6. Where do I open an account?
A DEMAT account can be opened through any of the DPs of Central Depository Serivces (India) Limited or CDSL. Information on account opening is available.
 
Q7. How do you invest through RGESS?
Investments into the RGESS are made through the DEMAT account. Eligible securities bought through the DEMAT account will automatically be subject to a lock-in during the first year. The investor will not be permitted to sell, pledge or hypothecate any eligible security during the fixed lock-in period. Trading of these securities is allowed after the completion of the fixed lock in period, subject to certain conditions. For further details please refer to the above section on "Procedure for Investment".
 
Q8. What is Lock-in Period of the investments in the scheme?
The total lock-in period for investments under the Scheme would be three years including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS.
 
Illustration of Lock-In in RGESS
 
 
Source: SEBI Circular No. CIR/MRD/DP/32/2012 dated December 6, 2012
 
Q9. What is the maximum eligible investment?
The investor is free to invest as much as he wants through his RGESS designated Demat account. However, for tax exemption purpose, only the investment made in the first year of his investment, subject to a maximum amount of Rs 50,000 is eligible.
 
Q10. What are the associated Tax Benefits?
  • A maximum of Rs. 50,000/- investment eligible for tax benefits; eligible for first year of investment only
  • Tax Deduction: 50% of invested amount (max Rs. 25,000/-)
    • For investors in 10% tax bracket - saving = Rs.2,500 (for investment of Rs. 50,000/-)
    • For investors in 20% tax bracket - saving = Rs.5,000 (for investment of Rs. 50,000/-)
 
Q11. What is the minimum eligible investment?
There is no minimum eligible investment.
 
Q12. What will be my return on the investment?
The return on the investments will be subject to market conditions. Historically, equity returns have been higher vis-à-vis Fixed Deposits on a long term basis.
 
Q13. What are the risks involved?
Any investment made in capital market is subject to market risk. Unsystemic risk, however, may be reduced drastically by making broad-based investments.
 
Q14. Can I lose the tax benefits?
The investor may lose the tax benefits in the following cases:
  • If the investor withdraws the investment such that it falls below the amount he sought tax exemption for, in the Flexible lock-in period
  • If the investor fails to fulfill any of the other provisions of the Scheme
 
Q15. Can I invest multiple times under the scheme?
The investor can invest as many times as he wants in his first year of investment. Investment made in subsequent years will not be eligible for tax exemption.
 
 
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